An Alberta company that bought an eastern Newfoundland oil refinery says federal changes to income trusts have hit it hard.

Calgary-based Harvest Energy Trust bought the refinery in Come By Chance from Swiss oil distributing giant Vitol for about $1.6 billion in a deal announced in August.

John Zahary, the president of Harvest Energy Trust, says new income-trust tax rules could affect expansion plans at Come By Chance.
(CBC)

Ottawa's decision two weeks ago to impose a new tax on income trusts caused Harvest Trust's market value to drop more than $600 million, and may affect plans for expansion at North Atlantic Refining.

"We want to enhance that business. We want to grow that business, but clearly for us to invest in that business, we need to raise capital," said president and chief executive officer John Zahary.

"That's something that we are going to have to potentially look at doing in different ways then we would have historically."

Harvest Energy Trust borrowed almost $500 million to purchase North Atlantic Refining, and had planned an issue of convertible debentures and trust units to raise money.

Zahary said the company will have to find new ways to pay off that debt.

North Atlantic had already established expansion plans before Vitol sold it.

In late 2005, the company said between $600 million and $800 million would be needed to pay for an expansion that would allow North Atlantic to compete globally with leading refineries.